On October 21, Bitcoin’s price briefly dipped below $67,000 but swiftly regained this level as support before the day’s close. This fluctuation is largely attributed to its correlation with the stock market, which also saw a significant drop.
Data from IntoTheBlock reveals that Bitcoin’s correlation with the S&P 500 stands at 0.63, indicating a strong positive relationship. Both the S&P 500 and the Dow Jones Industrial Average fell from their all-time highs as earnings reports loomed.
The downturns in both the stock market and Bitcoin are linked to broader market uncertainties. Rising inflation expectations and concerns about government spending have made investors cautious. Many are now looking to the US Federal Reserve for actions to keep inflation within the 2% target.
Additionally, the upcoming US presidential election has added another layer of uncertainty, with a tight race between Donald Trump and Kamala Harris. Traders often wait on the sidelines until after elections to better understand the market outlook under the new administration.
Further factors contributing to Bitcoin’s price drop include high open interest levels, whales reducing their long positions, and a recent rally driven by perpetual futures. Analyst Justin Bennett cited these reasons alongside election-related risks as key contributors to the downturn. Bennett had anticipated this pullback, suggesting that Bitcoin could correct to around $63,000. In a recent X post, he pointed out that $65,800 is a critical level for Bitcoin, holding above which could invalidate his bearish trade setup.
At present, Bitcoin is trading around $67,700, down almost 2% in the last 24 hours according to CoinMarketCap.